Latest arguments about what happened at MG Rover in 2005 must not obscure what was important then, and what is important now
The accountants Deloitte have lost an appeal over a regulatory ruling that it failed to manage conflicts of interest in its advice to the MG Rover Group and the “Phoenix Four” directors, who bought the UK carmaker before it collapsed in 2005.
It is highly concerning that the Tribunal found Deloitte and Mr Einollahi, the partner involved, demonstrated “a persistent and deliberate disregard of the fundamental principles” of the Institute of Chartered Accountants in England and Wales (ICAEW) – falling far short of the standards expected. Deloitte have written to me expressing their disappointment at the outcome of the appeal, and telling me that the implications for public interest go well beyond the case of MG Rover. The full Tribunal decision has not been published yet so I cannot comment fully on the ruling at this stage.
What I will say, though, is that whatever the relationship between the Phoenix Four and Deloitte, the findings of the 2009 independent inquiry into the way MG Rover and associated companies were financially structured between 2000 and 2005 revealed issues of deep concern.
The Rover Group could very easily have wound up after BMW pulled out of the company in 2000, or been downsized in so sudden a fashion that the impact on the West Midlands economy would have been immense. Studies at the time suggested that over 20,000 jobs were in jeopardy, more of them in companies dependent on Rover than at Longbridge itself. The fact that Longbridge did not go under at that time bought vital time for suppliers and West Midlands economy as a whole, enabling it to diversify and modernise. That safeguarded jobs and, when MG Rover’s collapse came in 2005, the job loss across the region was under half what it could have been five years before. And that collapse was not inevitable. It was right to use those years to try to find a partner that could have safeguarded MG Rover’s long term future. Indeed, MG Rover came tantalising close to securing such a deal.
In the event, though, the deal did not happen and over 6,000 Longbridge workers lost their jobs. They lost their jobs having done all that had been asked of them. Their efforts had also bought the time that allowed other West Midlands employees to keep theirs. Were it not for the last Labour Government’s enactment of pension protection legislation just weeks before the collapse, MG Rover workers would have lost nearly all of their pensions as well as their jobs.
No doubt the “Phoenix Four” would like to be remembered for keeping MG Rover in business for those five years, and for so nearly pulling off a deal that could have saved the company. Unfortunately their own actions mean they will not be remembered for those things. Instead, they will be remembered for the way they structured the companies they controlled, for featherbedding their own futures whilst leaving their employees so utterly exposed.
Deloitte’s dispute with the Financial Reporting Council is the latest episode in the MG Rover drama which never quite seems to come to an end. For me though, two things remain at the forefront of my mind. First is the contribution of the 6,000+ MGR workers who lost their jobs. Second is the importance of building a new future for Longbridge, and for the communities whose identity “the Austin” factory defined for over a century. The MG Motor Company – and it’s European Design and technical centre – are ensuring car making is part of Longbridge’s future as well as its past.
But so too are the new Bournville college, the Longbridge Innovation Centre, the new town centre and the new businesses to which Longbridge will be home in the years to come.
These, along with the other things that are going on in South West Birmingham, are what the launch of the recent Climb Project in the area is all about.
The name is not coincidental. It’s about remembering Longbridge’s past but also about its climb to the future.
You can read my press release on the decision today here: 201307 – Deloitte and Pheonix Four Ruling